What is and what is not a business strategy? Why do some businesses grow and others fail?

What is and what is not a business strategy? Why do some businesses grow and others fail?

The role of an experienced business advisor and entrepreneur at the same time is an invaluable value, says Beata Drzazga – business mentor, founder and president of BetaMed SA – the largest Polish medical company dealing with long-term home care.

Why do so many companies close in the first two years of their operation? Can business mentoring be the solution to this problem?

The answer is very simple, these companies are not able to generate adequate added value. Their founders are very often outstanding specialists in their fields, may have impressive academic titles, but do not necessarily have sufficient knowledge in the field of business management. A young company must have its own sources of financing, an ordered structure, competent staff as well as a marketing and sales strategy. Everything takes place under conditions of extremely intense competition, so in order to be successful, it is best to be perfect in each of these areas. Meanwhile, no one is an expert on everything. As a result, young businesses often make trivial mistakes. Years of experience in business and observation of various companies have led me to an interesting conclusion. Entrepreneurs may have a huge amount of business ideas, but the catalog of mistakes they make is very limited. This means that an experienced business mentor is able to identify these errors very quickly.

So what are these mistakes?

Many companies are created out of passion. I could talk about it for a long time, because all my companies were created out of passion. This was the case with BetaMed SA, where I really wanted to create a medical company that would really take care of patients, it was also the case with the clothing company Dono da Scheggia and with BetaMed International in Las Vegas. The problem is that when a business is created out of passion, it is very easy to forget about the economic realities. Also for me, avoiding simple mistakes has not always been easy. Analyzing them now, I can clearly see that I often missed simple advice from someone more experienced in business.

Entrepreneurs very often focus on too small or too large a market niche. Too small a niche means that we will not be able to generate adequate revenues, while an attempt to serve too large a market with limited resources will most likely end in failure. Another common mistake is not being ready for sudden growth. If the product is really good, we may find ourselves in a situation where we suddenly have to serve a huge number of customers. This means that our company must have what management specialists call scalability – it must be ready to grow slowly while keeping costs low, but also to be financially

and handle the surge.

Young entrepreneurs often fall prey to overconfidence, have the illusion of control resulting from insufficient knowledge about the market and competitors, and may overestimate the importance of experiments carried out on too small a sample. They also fall into the so-called commitment trap, i.e. they continue to act fruitlessly because they have already committed a lot of work and resources to it. Committing these mistakes means entrepreneurs waste time and give competitors an opportunity to grow. Meanwhile, an experienced mentor, business advisor or business angel sees such situations immediately and, moreover, knows how to react to them.

As a rule, young enterprises operate in a rather specific and difficult situation. On the one hand, they have limited resources, on the other hand, they operate under conditions of great uncertainty. They also need to develop very quickly to stay ahead of the competition. How to deal with these problems?

True, I have seen many companies whose resources were limited to the limit of the founder’s credit card and the small amounts that could be borrowed from the immediate family. In such a situation, any mistake is very costly, which means that we should at least avoid making the most obvious mistakes. Perhaps the most important concept novice entrepreneurs should keep in mind is competitive advantage. We must be able to offer buyers more added value than our competitors. A competitive advantage may result from lower costs or, for example, from the use of a unique technology. In any case, it will only be permanent if it is difficult to copy. In fact, competitive advantage is what makes some companies fail and others growing. Developing and maintaining a competitive advantage is the most important task of the enterprise.

As an enterprise has to develop quickly in conditions of very intense competition, very often its first strategic goal is to obtain external financing. Here too, a business mentor can be very helpful. He can even help you directly by using your contacts. However, most often it helps the company by validating the business model. It uses the same tools that a potential investor will later use. This means that the entrepreneur learns to speak the language of the investor, begins to understand

his needs and build the organization in such a way as to minimize the risk. Then it is much easier to obtain financing, both from a private investor and through a stock exchange debut.

So it can be said that companies are developing too slowly or collapsing for banal reasons, and an experienced business advisor is very often able to help.

Many companies fail because they shouldn’t have arisen at all – for example, because their business model didn’t make sense from the start. However, the opposite is also worth considering. Lots of enterprises do not arise, despite the fact that their potential founders have the appropriate competences, knowledge and even sufficient resources. Starting a business is often seen as a very risky step. Not everyone is mentally ready for this kind of challenge. Here, too, I see a huge role for business mentors. Running a business in Poland is relatively simple, taxation is lower than in the case of employment contracts, and the regulations and offices, contrary to popular opinion, are in my opinion friendly to entrepreneurs. The role of business mentors is therefore to help overcome mental barriers, to convince potential entrepreneurs that it is very often worth taking the risk that through business you can enjoy independence, make your dreams come true or solve important problems.

In general, I believe that Polish entrepreneurs are too afraid of risk. Even the more experienced ones often avoid international expansion. They are also afraid of competing with international corporations on their own local market, despite the fact that they are often in a much better position. Meanwhile, international expansion is now much simpler than a dozen or so years ago. Entrepreneurs have access to global platforms such as Amazon, E-bay, and Etsy. With their help, products can be offered in dozens of countries around the world without the need to build local structures and distribution networks. Today, even a one-man business can operate on the global market. This is actually another set of problems that are quite difficult for entrepreneurs and obvious to an experienced advisor.

In conclusion, should you not be afraid of the risk?

Yes, entrepreneurs have to accept the fact that business is inherently risky, no risk, no development. Entrepreneurship is not about avoiding risks, but about understanding them.